A plume of smoke billows out as the engines of the Vietnamese ship rev up. A message of warning in Chinese language blares out across a loudspeaker.

"You must remove all vessels immediately. This is the exclusive economic zone of Vietnam," it says. The Vietnamese ship and several others on either side begin to retreat.

"Withdraw your ships and remove the Haiyang Shiyou 981 oil rig."

A group of Chinese ships join the pursuit, peeling away from a flotilla of about two-dozen vessels surrounding HD-981, the $1 billion rig that China deployed without notice in early May, triggering the worst breakdown in ties between the communist neighbours in three decades.

Vietnam says this stretch of the South China Sea is in its 200-nautical mile exclusive economic zone and accuses China of bullying and trying to ram Vietnamese fishing vessels in the potentially energy-rich waters.

Vietnamese coastguard ship 8003, with a small group of foreign journalists on board, came within 10 nautical miles of the rig on Tuesday, but that was as far as it was willing to go. And it lingered for just half an hour.

It is a cat-and-mouse game that has been going on for two months and the crew of CG 8003 has seen it all before. Outnumbered and out-gunned, they turn back and the Chinese ships eventually give up their chase.

This kind of squaring-off has caused alarm in the region and the United States on Friday called for a voluntary halt on action by all sides that could aggravate tension. It described China's behavior as "provocative and unilateral".

China claims about nine-tenths of the South China Sea but insists it wants a peaceful resolution to the conflict. That, however, seems unlikely any time soon and both China and Vietnam are refusing to back down.

MILITARY PRESENCE REJECTED

China vehemently denies mobilising military ships in the waters, but among the crew aboard CG 8003, those protestations do not carry much weight. Earlier on Tuesday, men gathered around a radar screen in the control room as others on deck peered through binoculars and took video footage of Chinese vessels clustering on the horizon.

A television screen picked out one of two grey-coloured Chinese frigates in the distance, with what appeared to be small missiles launchers at the stern.

The captain picked up a phone and radioed information to the coastguard on the mainland, reporting what the crew described as "fast missile attack ships", one numbered 751. An unidentified aircraft flew over the Chinese ships in the distance.

Nguyen Van Hung, captain of this South Korean-built ship, says his mission is not military, but to communicate closely with fishing vessels and protect them from an increasingly assertive and better-equipped China.

The coastguard, he says, want the fishermen to be safe to operate anywhere within Vietnam's claimed territory, including around the China-occupied Paracel islands.

He was unwilling to discuss the limits of the radar he uses, but believes better equipment is needed amid rising tension.

"It's good enough to do what we need to do, but of course, we need better, more comprehensive and more modern equipment," Hung told Reuters, looking at a radar screen that showed a few dozen unidentified boats dotted around.

"We need more modern boats so we can do our duty, protect our fishing vessels and have a presence in these waters to prove our sovereignty." Better equipment may come sooner than expected as a result of the dispute over the oil rig, which Vietnamese officials believe has earned it some sympathy from regional allies who could provide some carefully calibrated support.

Japan, which has its own maritime disputes with China, has pledged help for the coastguard and Vietnamese Prime Minister Nguyen Tan Dung recently approved a $540 million budget to build 32 coastguard vessels and upgrade the existing fleet.

CG 8003 does pack some punch but Captain Hung insists it is for self-defense only.

The ship has five guns in fixed positions, plus several water cannons on board, all under green tarpaulin covers.

"The intensity has been increasing and it's a lot more serious, but it's the policy of the coastguard, the government and the Communist Party of Vietnam that we solve this problem peacefully," Hung said.

"We just want to show China its actions are wrong and we request they withdraw this rig."